Economic Challanges of Pakistan

Economic Challenges of
Pakistan and Solution
Subject: Pakistan Affairs

By: Usama Bin Ashraf
PAS
MPhil History
Lecture Outline
1. Economy: Meaning &Concept

2. Economy of Pakistan
3. Characteristics of Pakistan's Economy
4. Foremost Economic Challenges of Pakistan
5. Solution of Economic Problems of Pakistan
6. Pakistan Trapping in Foreign Debts
7. Debts Reduction in Pakistan: Pertinent Measures
8. How to increase Exports of Pakistan?
9. How to attempt the Question?
Economy: Meaning &Concept
▪ Economy: An area of production, distribution,

trade, consumption of goods and services by
different agents is called economy.
▪ An economy is the large set of inter-related

production and consumption activities that aid in
determining how resources are allocated & used.
▪ In an economy, the production and consumption

of goods and services are used to fulfill the needs
of those living people.
▪ Economic activity is stimulated by production

which uses natural resources, labor and capital.
▪ Economics as an area of study was touched on by
philosophers in ancient Greece, notably Aristotle,
but the modern study of economics began in 18th
century from Europe.
▪ Every country has to adopt the economic system

to run its economic affairs for its internal and
external economic dealings.
▪ In present world capitalist economic system is

dominated around the world.
▪ Free market economy
▪ Privatization
▪ Property ownership
▪ Competition
▪ Class struggle
Significance of Economy
▪ Help to increase national wealth and fulfill the
basic needs of society.
▪ Provide sources of income to people for their

living hood.
▪ Guide how to utilize national resources for state

progress and raise living standard of the people.
▪ Teach modern methods of production and

distribution.
▪ Provide guideline in making national budget and

engage people in various economic activities and
professions.
Economy of Pakistan
Economy of Pakistan
▪ Pakistan is a developing country with have a
great potential in economic uplift. Our economy
is semi-industrialized and mostly agricultural
driven.
▪ Primary export commodities include textiles,

leather goods, sports goods, chemicals, fruits,
vegetables, surgical instrument, sea food and
carpets/rugs.
▪ The economy, which was primarily agricultural at

the time of independence, has become
considerably diversified.
▪ Agriculture, now no longer the largest sector,

contributes roughly one-fifth of GDP, while
manufacturing provides about one-sixth.
Economy of Pakistan
▪ Trade and services which combined constitute the
largest component of the economy, have grown
considerably.
▪ In fiscal year 2020-21, Pakistan's economy

experienced a setback due to the COVID-19
outbreak, with negative growth rate of 0.4%.
▪ Currently, private consumption and investment have

fallen in FY2021-22 sharply.
▪ Exports and imports have also declined due to weak

global trade and domestic demand.
▪ Growth poles of Pakistan economy are situated

along the Indus River the diversified economies
of Karachi and major urban centers in the Punjab
Economy of Pakistan
▪ Economy has suffered in the past from

internal political disputes, a fast-growing
population, slow pace of foreign
investment. Foreign exchange reserves are
bolstered by foreign remittances.
▪ Current, account deficit is driven by a

widening trade gap between high imports
and low exports.
▪ Pakistan is currently undergoing a process

of economic liberalization, including
privatization of all government corporations
aimed to attract foreign investment and
decrease budget deficit.
Economy of Pakistan
▪ Pakistan is focusing to expand the industrial Economic Liberalization

network of Electric Vehicle, biomedical,
electromagnetic, smart phones and semi- Economic liberalization is the
lessening of government
conductor Industry.
regulations and restrictions in
an economy in exchange for
▪ World Bank and International Finance greater participation by private
Corporation report Ease of Doing Business entities.
Index 2020 ranked Pakistan 108 among 190
countries, taking a jump from 136 in 2019.
Characteristics of Pakistan
Economy
Characteristics of Pakistan's Economy
▪ Agrarian based.
▪ Exceedingly dependent on foreign debts

and aid.
▪ Less technological and not as much of

semi-industrialized.
▪ Extensive consumer based.
▪ High government expenditures and low

collection of revenue.
▪ Less diversify in exports commodities.

Foremost Economic
Challenges of Pakistan
Foremost Economic Challenges of Pakistan
▪ We Import more and Export Less.
▪ Government spends more than it earns as

Revenues.
▪ Devaluation of currency.
▪ External debts, caught in foreign cloches.
▪ Mismanagement of natural resources.
▪ Energy crisis.
▪ Low FDI.
Foremost Economic Challenges of Pakistan
▪ Over dependency on agriculture sector
▪ High cost of doing business.
▪ Inflationary pressures.
▪ Low domestic savings which, given the

increasing strains on external debts.
▪ A poor outlook for private capital inflows.
▪ Inconsistency in economic policies.
▪ Domestic instability and political

inconsistency.
Solution of Economic Problems
of Pakistan
Solution of Economic Problems of Pakistan
▪ Exploration of new markets.
▪ Rapid Industrialization.
▪ Tight monetary policy.
▪ Investor’s friendly policies.
▪ Elimination of bureaucratic hurdles for

local and foreign investment.
▪ Horizontal and uninterrupted

Privatization.
Solution of Economic Problems of Pakistan
▪ Structural adjustments with IMF and

World Bank.
▪ Effective utilization of Young Labor Force.
▪ Reforms in tax collection.
▪ Increase the export volume with reducing

dependency on external loans.
▪ Improved law and order.
▪ Ensure good governance.

Pakistan Trapping in Foreign Debts
▪ There are two ways to conquer and enslave a
nation one is by the sword and the other by debt.
▪ External debt burden can badly affect a country's

economic progress and political sovereignty in
case of mishandling of these foreign debts.
▪ If the foreign debt is not repaid, the country may

either defaults or has to borrow more to repay
the debts.
▪ High debts are resulted in:

▪ Rise of inflation
▪ Retard in economic growth rate
▪ Decline in investment
▪ Rise in Poverty
▪ Pakistan lacks financial, human and

physical capital and vulnerable
macroeconomic conditions since its
independence.
▪ Pakistan spends about 65% of its budget

to repay its foreign debts and remaining
to spend on defense, health, education
and infrastructure.
▪ Our debts are a great threat not only

internal development but also adversely
affecting to meet our foreign policy goals.
▪ According to IMF and World Bank reports

external Debt of Pakistan is now around
US$ 123.7 billion by December 2021.
▪ Indebted Pakistan have not established a

good track record in effective use of
foreign loans making improvements in
poverty reduction
▪ Country is still suffering in the result of

huge debt burden.
Debts Reduction in Pakistan:
Pertinent Measures
Debts Reduction in Pakistan: Pertinent Measures
Structural Reforms
▪ Pakistan needs structural reforms to

diminish the volume of external debt to
set its economy on the stable basis of growth
▪ Reducing volume of imports and

diversifying the domestic resources.
▪ To expanding tax base.
▪ To stop economic terrorism
▪ To shift human intellectual capital
Diversification in Exports Commodities
▪ Foreign debts can only be reduced when

Pakistan will enhance its volume of
exports. Pakistan needs to diversify its
exports base.
▪ We have limited exports commodities

including textile, leather, cotton and
grains.
▪ We should go for in making value-added

items like: computer chips, mobile parts
integrated circuits, machinery, light
engineering goods.
Dropping Government Expenditures
▪ The biggest expense of a country is the

one that the government spends at its
functioning. This, in turn, reduces the GDP
of the country.
▪ High expenditures increase burden on

economy. Government needs to reduce
the unnecessary expenditures.
▪ In the result, it will slow down the rate of

taking foreign debts.
Encouraging Foreign Direct Investment

(FDI)
▪ Foreign investors and companies should be
motivated and attracted to invest in
Pakistan.
▪ This can be done by investor friendly

policies and ease in doing business with
protection in legal security terms for
investors.
▪ To attract investors Pakistan requires to do:

▪ Domestic stability
▪ Eliminate red tapism
▪ Make better infrastructure
▪ Legal protection of foreign investors
More Access to Foreign Markets for

Pakistani Goods
▪ Pakistani goods needs more access

foreign markets around the world.
▪ We can compete with other countries

products, which will increase exports,
improving the balance of payment.
▪ Embassies can play an vital role to find

new markets for Pakistan goods in
abroad.
Reducing the Balance of Payment
▪ Balance of payment depends on the

volume of exports and imports of
country.
▪ Pakistan trade balance is negative.

Pakistan should increase its exports to
minimize its negative balance of
payment.
▪ Positive trade balance will increase our

foreign exchange reserves and reduce
our dependency on foreign debts.
Proper Collection and Utilization of What is Public finance?

Public Finance Public finance is the study of
the role of the government in
the economy. It is the branch
▪ Pakistan faces a severe crisis in tax the of economics that assesses
collection and its proper utilization. the government revenue and
government expenditure of
the public authorities and the
▪ An effective tax collection mechanism adjustment of one or the
should be designed and implemented to other to achieve desirable
effects and avoid undesirable
increase public revenue.
ones
▪ Furthermore, a strict check and balance

method should be developed to ensure
that the revenue is being utilized in a
productive manner.
Ensure Political and Social Stability
▪ The growth of a country economy is highly

dependent on its social and political
stability.
▪ Pakistan has been a victim of political

stability in terms of military intervention &
unstable democratic regimes.
▪ Socially, Pakistan is facing severe

extremism and terrorism. Hence, a stable
Pakistan is a pre-requisite for economic
growth and debts reduction.
Controlling Population Growth
▪ Pakistan is included world largest

populated countries. Higher population is
burden on our economy and national
resources.
▪ Pakistan has to attain foreign loans to meet

the needs of its population.
▪ Enough control of population can ensure

economic independency at home and it will
eventually diminish our reliance on foreign
debts.
Endorsement of Free Trade
▪ Barriers to borders and approvals for

trade between neighboring countries
should be reduced or finished to
increase the area of economic
activity.
▪ The broader and widened economic

activity will definitely improve the
economy and reduce the load of
external debts of Pakistan.
How to increase Exports of Pakistan?
▪ Exports are the backbone of

economy of any country. Where
domestic consumption is low,
exports help to earn valuable
foreign exchange.
▪ High exports means positive trade

balance. Pakistan exports volume is
less as compare to its imports.
▪ Following are steps to enhance

exports capabilities of Pakistan.
Diversify Exports Base
▪ Our current exports base which is mostly
limited to basic commodities of: Textiles,
Leather, Cotton and Grains.
▪ Value added exports hook the higher prices in

international markets.
▪ Pakistan needs to add more value added

items in its exports list like computer
accessories, light machinery, mobile parts,
pharmaceuticals, engineering goods etc.
▪ It will have three benefits: Uplift exports

volume generate jobs opportunities and
promote entrepreneurship.
Aid for Trade

Aid for Trade is WTO
program is about ❖ World Trade Organization (WTO) can help
helping developing Pakistan to enhance its exports
countries to build capabilities thorough it “Aid for Trade”..
the trade capacity and
infrastructure to uplift ❖ Under this program Pakistan can get
exports. It is part of assistance from WTO to increase its
Official exports net:
Development Assistance
❖ Training for workers.
(ODA) which grants
❖ Get support to explore new markets.
concessional loans to
developing countries. ❖ Adding value products.
Support Entrepreneurship
▪ To increase the volume of exports

government should support the
entrepreneurship by giving easy loans
to youth.
▪ Entrepreneurship will:
▪ Excel business activities
▪ Raise domestic production of goods
▪ Economic self-reliance among youth
▪ Job opportunities.
▪ Attract foreign buyers for exports.
Active Role of Embassies
▪ Embassies are representatives of any state.

They play a vital role to attain the economic
interests of their countries.
▪ Pakistan has a extensive network of

embassies worldwide. Our embassies can
uplift the Pakistan exports by following
measures:
▪ Search markets for Pakistan goods in host
country.
▪ Conduct exhibitions and business meetings
of country products in host country.
▪ Build a bridge between business community
of two countries.
Upgrade the Service Sector

What is Service Sector?
▪ Pakistan needs to advance the service ▪The service sector provides
sector to increase its exports volume. services, rather than producing
commodities. Activities in
service sectors includes:
▪ Currently, service sector of Pakistan is
o retail, banks, hotels, real
contributing 59 % of country exports. estate, education, health,
computer services, social
▪ There are potential opportunities of work, media, recreation,
service sector of Pakistan in IT, telecom, communication, water
supply etc.
banking, E-commerce to earn great of
amount of foreign exchange for
country.
How to attempt the Question?
Q:What measures would you suggest to improve economy of Pakistan
mainly in areas of debts reduction and enhancing export volume?
(CSS 2016)
❖ Introductory Paragraph ( 12 to 14 Lines)

❖ Debts Reduction in Pakistan: Pertinent Measures
❖ Structural Reforms
❖ Diversification in Exports Commodities
❖ Efficient Utilization of Domestic Natural Resources
❖ Dropping Government Expenditures
❖ Encouraging Foreign Direct Investment (FDI)
❖ Access to Foreign Markets for Pakistani Goods
❖ Reducing the Balance of Payment
❖ Proper Collection and Utilization of Public Finance
❖ Ensure Political and Social Stability
❖ Controlling Population Growth
❖ Endorsement of Free Trade
How to attempt the Question?
▪ Recommendations: Enhance Exports Capabilities

▪ Diversify Exports Base
▪ Aid for Trade
▪ Support Entrepreneurship
▪ Active Role of Embassies
▪ Upgrade the Service Sector
▪ Liberal Economic Policy
▪ Conclusion

Economic Challanges of Pakistan

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Economic Challenges of

Pakistan and Solution

Subject: Pakistan Affairs

1. Economy: Meaning &Concept

▪ Economy: An area of production, distribution,

▪ An economy is the large set of inter-related

▪ In an economy, the production and consumption

▪ Economic activity is stimulated by production

▪ Every country has to adopt the economic system

▪ In present world capitalist economic system is

▪ Provide sources of income to people for their

▪ Guide how to utilize national resources for state

▪ Teach modern methods of production and

▪ Provide guideline in making national budget and

▪ Primary export commodities include textiles,

▪ The economy, which was primarily agricultural at

▪ Agriculture, now no longer the largest sector,

▪ In fiscal year 2020-21, Pakistan's economy

▪ Currently, private consumption and investment have

▪ Exports and imports have also declined due to weak

▪ Growth poles of Pakistan economy are situated

▪ Economy has suffered in the past from

▪ Current, account deficit is driven by a

▪ Pakistan is currently undergoing a process

▪ Pakistan is focusing to expand the industrial Economic Liberalization

▪ Exceedingly dependent on foreign debts

▪ Less technological and not as much of

▪ Extensive consumer based.

▪ High government expenditures and low

▪ Less diversify in exports commodities.

▪ We Import more and Export Less.

▪ Government spends more than it earns as

▪ External debts, caught in foreign cloches.

▪ Mismanagement of natural resources.

▪ Over dependency on agriculture sector

▪ High cost of doing business.

▪ Low domestic savings which, given the

▪ A poor outlook for private capital inflows.

▪ Inconsistency in economic policies.

▪ Domestic instability and political

▪ Exploration of new markets.

▪ Tight monetary policy.

▪ Investor’s friendly policies.

▪ Elimination of bureaucratic hurdles for

▪ Horizontal and uninterrupted

▪ Structural adjustments with IMF and

▪ Effective utilization of Young Labor Force.

▪ Reforms in tax collection.

▪ Increase the export volume with reducing

▪ Improved law and order.

▪ Ensure good governance.

▪ External debt burden can badly affect a country's

▪ If the foreign debt is not repaid, the country may

▪ High debts are resulted in:

▪ Pakistan lacks financial, human and

▪ Pakistan spends about 65% of its budget

▪ Our debts are a great threat not only

▪ According to IMF and World Bank reports

▪ Indebted Pakistan have not established a

▪ Country is still suffering in the result of

▪ Pakistan needs structural reforms to

▪ Reducing volume of imports and

Diversification in Exports Commodities